Anticipating and deciding with method
Selling or acquiring a business is always a strategic decision involving significant financial, human, and wealth-related stakes. The big question is : what is the right time to sell or acquire a company? As in the stock market, it is easy to identify the “right timing” afterward, but difficult to anticipate it with certainty.
In the context of an SME sale, the challenge is even greater since an unlisted company does not evolve at the instant pace of a financial market. Its value is not determined by daily transactions but depends on more stable fundamentals : economic performance, growth prospects, management quality, and the strength of commercial contracts.
The key, therefore, is to anticipate and prepare the transfer so that the sale occurs under optimal conditions.
1) The “inflection point” : selling before the decline
Economists use the term inflection point to describe the moment when a curve changes direction : when growth slows and is about to reverse. Applied to a business sale, this point corresponds to the moment when the company is still on a positive trajectory but close to its peak.
This is generally the best time to sell : the company attracts buyers because it still shows strong potential while justifying a high valuation. Yet in practice, few owners manage to sell at the “top” : emotions and attachment to the business often cloud rational judgment.
2) The seller’s psychological factor
A business owner is not just a rational “homo economicus.” They often have a strong emotional bond with their company, especially if they founded or inherited it. In multi-generational family businesses, this bond is even stronger. The prospect of selling can then feel like a true grieving process.
Two personality traits reinforce the difficulty of choosing the right moment :
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Optimism : when facing difficulties, the owner believes they can always turn things around.
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Confidence in the future : when things are going well, they believe success will last indefinitely.
The result : it is rare for the psychological decision to sell to coincide with the economically optimal moment.
3) The three common mistakes of selling owners
Nine times out of ten, a sale is complicated by three pitfalls :
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Lack of preparation : the company is not optimized to attract buyers (poor financial visibility, excessive dependence on a single client, lack of managerial delegation).
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Valuation gap : the seller often has a subjective view of value, based on the company’s best past years, while the buyer reasons on future cash flows.
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Lack of personal anticipation : the owner has not thought about their life project after the sale and faces a sudden void.
The key is to adopt a rational approach, relying on specialized advisors (M&A consultants, lawyers, accountants, etc.) to prepare both the company and the owner for this stage.
4) The buyer’s challenges
On the buyer’s side, the situation is no easier. The buyer faces several constraints :
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Good targets are rare : opportunities cannot be missed.
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Limited visibility : even after due diligence, uncertainties remain about contracts, client retention, or hidden debts.
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Limited financial resources : debt must stay manageable to avoid endangering the financial structure.
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Competition between buyers can lead to risky overbidding.
A good buyer must therefore be able to make decisions under uncertainty, balancing the scarcity of opportunities with the need to remain cautious.
5) The legal and tax levers to secure the sale
1) The legal and tax levers to secure the sale
To protect both the seller and the buyer, several tools are commonly used in a transaction :
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Asset and liability guarantees : protect the buyer against tax, social, or environmental risks not disclosed at the time of sale. In practice, part of the price (often 10–15%) is held in escrow for 2 to 3 years.
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Earn-out clauses : allow valuation to be adjusted according to the company’s future performance.
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Tax optimization strategies : gift before sale to transfer to children while limiting taxation, or contribution-sale to a holding company to defer capital gains tax and reinvest.
These mechanisms require expert guidance to avoid costly mistakes.
THE EVALIANCE CAPITAL APPROACH
ANTICIPATING AND DECIDING
The sale or acquisition of a company is never trivial. On the seller’s side, it requires moving beyond emotions and preparing the business to be attractive. On the buyer’s side, it means being able to decide under uncertainty while legally and financially securing the transaction.
The golden rule : ANTICIPATE, surround yourself with experts, and stay clear-headed. Because at the moment of signing, one truth always remains :
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The seller thinks they sold too low.
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The buyer is convinced they paid too much.
That is, in fact, the sign of a balanced transaction.
